Building permits drop and housing starts in September 2024

In September, privately owned housing units for which building permits were issued recorded a rate of 1,428,000, representing a decrease of 2.9% from August’s revised rate of 1,470,000, and 5.7% lower compared to the September 2023 rate of 1,515,000. The number of building permits for individual residential units in September was 970,000, reflecting a slight increase of 0.3% over the revised figure of 967,000 for August. The average building permit rate for units in buildings containing five units or more was 398,000.

Start housing

Privately owned housing operations in September saw a seasonally adjusted annual rate of 1,354,000, representing a decrease of 0.5% (± 13.0%) compared to August’s revised estimate of 1,361,000, and 0.7% (± 16.1%) lower than the September 2023 rate of 1,363,000. As for single-family housing, the construction rate in September was 1,027,000, an increase of 2.7% (± 13.4%) from August’s revised figure of 1,000,000, while the unit rate in buildings with five or more units was 317,000.

Housing completion

For privately owned housing completion, the September completion rate was 1,680,000, representing a decrease of 5.7% (± 19.9%) from the revised August estimate of 1,781,000, but 14.6% (± 11.9%) higher than the September 2023 rate of 1,466,000. The housing completion rate per family in September was 1,000,000, representing a decrease of 2.7% (± 7.8%) from August’s revised rate of 1,028,000, while the unit completion rate in buildings with five or more units was 671,000. The October report is scheduled for November 19, 2024, and the full timeline can be found at the Economic Conference.

The impact of building permits on the financial markets and the US housing market

Building permits in the United States are a crucial economic indicator that reflects future construction activity and the public health of the housing market. The impact of building permits on financial markets is significant, affecting the equity, bond, currency and commodity markets.

In stock markets, the increase in building permits indicates strong demand for housing, boosting shares of homebuilders and construction-related companies. Conversely, the decline raises concerns about a weak housing market, which could lead to lower stock prices in these sectors. In bond markets, stronger building permits indicate economic growth, which could prompt the Fed to consider raising interest rates to manage inflation, thereby increasing bond yields and lowering prices. Conversely, weak declarations can increase demand for safe-haven Treasuries, pushing prices higher.

In currency markets, strong building permits could strengthen the U.S. dollar, suggesting a healthier economy, while weak data could lead to a weakening of the dollar due to lackluster growth prospects. In addition, demand from the construction sector for commodities such as timber, copper and steel means that higher building permits often lead to higher commodity prices due to increased demand for raw materials. Conversely, lower permits may put downward pressure on commodity prices.

Overall, building permit data in the United States acts as a biometric of the health of the economy, with positive data driving stocks, pushing bond yields higher, strengthening the dollar, and boosting commodity prices, while negative data can lead to declines across these financial markets.lower building permits could signal a slowdown in the housing market, leading to concerns about an economic slowdown and a potential dollar depreciation.

Impact of Building Permits on the Value of the US Dollar

U.S. building permit data can have a significant impact on the value of the U.S. dollar, serving as a key economic indicator that reflects the health of the housing market, and therefore the broader economy.

How Building Permits Can Affect the US Dollar:

  1. Economic Power Index

Building permits are a key indicator of future construction activity. The rise in building permits indicates an increase in the future supply of housing, indicating strong demand and confidence in economic growth and increased spending on construction projects. As a result, positive building permit data could boost confidence in the US economy, leading to a stronger US dollar as investors expect higher economic growth and the possibility of higher interest rates.

  1. Impact on interest rates

The Fed monitors economic indicators such as building permits when making decisions on monetary policy. If building permits increase, indicating a strong housing market and economic expansion, the Fed may consider raising interest rates to manage inflationary pressures. Higher interest rates attract foreign investment in US assets, boosting demand for the U.S. dollar and raising its value.

  1. Market Reactions

Currency traders and investors often react quickly to building permit data. Positive surprises – when building permits exceed expectations – can lead to short-term rallies in the US dollar, while weaker-than-expected data could lead to a sell-off. Thus, the data can lead to fluctuations in the currency markets, affecting the value of the US dollar in the short term..

  1. Linking to the housing market

Since the housing market contributes significantly to the overall economy, strong building permit data usually means growth in the real estate sector, higher consumer confidence, and increased spending. These factors tend to support the dollar. On the other hand

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